Twenty years ago I was standing in a football field in a school in Bradford, watching a group of mullahs burn The Satanic Verses. I was then a university student from nearby Leeds, from where I had come with a group of Muslim protesters to gather on a cold Saturday morning in March, to chant slogans calling for the death of Salman Rushdie. After the speeches in English and Urdu were delivered an awkward moment of inertia elapsed. A shout went up to burn the book but the organisers seemed reluctant to begin until the camera crews from BBC Yorkshire had turned up to film them. The protagonists were savvy enough, even then, to stage their indignation with one eye firmly on the cameras.

Islamic identity politics did not suddenly appear on the scene after the Rushdie affair. It was already fully formed and operational in many parts of Britain like Birmingham and Bradford. By then Britain had come a long way from the race riots that had engulfed it in the early eighties. It was no longer a society cleaved along lines of race. Society was undergoing the effects of multiculturalism and the focus had shifted to religious and cultural issues.

In the 1970s Asian immigrants to Britain organised their activism in a unified secular battle against racism. But by the 1980s organisations like the Asian Youth Movement, one of the beacons of anti-racism politics, began to disintegrate as multiculturalism spread across the fabric of society. As racism receded what replaced it was a society fragmented. Different groups asserted their particular identities more fiercely and unelected community leaders became the handlers the government used to engage with communities identified by religion.

In From Fatwa to Jihad, Kenan Malik takes a panoramic view of England before and after the seismic events of the Rushdie affair. In a collection of punchy chapters in razor sharp prose comes an intelligent and insightful analysis of how racism, multiculturalism, religion and terrorism has affected British society over the last twenty years.

Malik was born in India to a Muslim father and a Hindu mother and came to England when he was five. "Like Rushdie", he says, "I was of a generation that did not think of itself 'Muslim' or 'Hindu' or 'Sikh' or even as 'Asian', but rather as 'black'. 'Black' for us was not an ethnic label but a political badge". Rushdie himself described The Satanic Verses as "about migration, metamorphosis, divided selves, love, death" and one of the ironies Malik returns to again and again, is to is show how Khomeini's fatwa, rooted as it was in the illusion of tradition and immutability, transformed the religious and cultural landscape of Britain.

It was political expediency, not divine law, that motivated Khomeini to issue his fatwa in February 1989. His regime was struggling to retain legitimacy amongst his own followers, most of it lost to political reformists in Tehran. Abroad, he was losing the battle for spiritual supremacy to Saudi Arabia and he was desperate to regain some of the face that he had personally lost. The Saudis were in the ascendant with the growth of Salafi Islam, its denomination of choice and its Trojan horse into thousands of mosques and universities all over the world.

In a chapter on the growth of Islamist radicalism in the Muslim community, Malik's commentary takes us to North Yorkshire to show us the Mullah Boys of Beeston, the gang led by Mohammed Sidique Khan and Shehzad Tanweer, two of the perpetrators of the July 7 terrorist attacks in London. He dismisses the idea that they were compelled by foreign policy, but rather by rage, a loss of identity and getting "caught between no cultures". They were worldly Muslim men who had found the expression for their personal alienation in the spurious legitimacy of extremism.

In the last third of the book in, Malik delves into the restrictions of free speech in the post-Rushdie world. As Hanif Qureishi puts it, "Nobody would have the balls today to write The Satanic Verses, let alone publish it. Writing now is timid because writers are terrified". He is probably right when you consider the Muhammad cartoons scandal and Random House's decision to retract the publication of Sherry Jones' novel The Jewel of Medina, based on a message thread on an online discussion forum.

These are just two instances of how the grievance culture of radical Islam is winning the battle against Enlightenment values, helped along, Malik believes, by multicultural policy and laws like the Racial and Religious Hatred Act (2006), which has made it an offence to incite hatred against a person on grounds of their religion. Its aim was to protect the faith and dignity of minority communities. But the paradox is that these laws are now exploited to undermine the civil liberties of those very same communities they were meant to protect. The censorship that the anti-Rushdie protestors demanded is the same censorship of offensive thought that imprisoned the cartoon protestors.

The great appeal of From Fatwa to Jihad is its pitiless observation and it is this which raises it above the easy standards of one-sided polemic. No one gets away – certainly not Islamic radicalism and multiculturalism and its penchant for ethnic and religious particularism, the monomaniacal Melanie Phillips and the chauvinism of Daniel Pipes and Mark Steyn are all roundly criticised. If Malik's book advocates anything, it is a social order based on universalist Enlightenment values, the importance of free speech and for the elevation of secular and progressive ideas within minority, particularly Muslim, communities.